LABOR WARS: Can the Labor Inspectorate Order Employers to Pay Wage Adjustments?

It's not every day that a business owner with employees in office roles faces a labor inspectorate audit. Such inspections are far more common in industrial and manufacturing environments, where the likelihood of issues potentially endangering employee health is significantly higher. However, a paradoxical situation can arise when the labor inspectorate imposes measures to address the identified shortcomings.

The authority of the labor inspectorate to conduct regulatory audits of administrative positions is derived from the Act on Labor Inspection (Act No. 125/2006 Coll.). However, when the inspectorate adds a creative interpretation of legal provisions to its statutory powers, the substantive imposition of measures may appear as a non-systematic element within the Slovak legal framework.

This paradox indeed befell our client. Following the inspection, the labor inspectorate's final report ordered the employer to pay the employee the difference between their actual wage and the wage corresponding to a higher degree of job complexity - for the entire duration of their employment with the client. The most critical issue lay in the fact that, based on the report, our client was obliged to settle even the time-barred wage claims, without any opportunity to defend themselves, such as by raising an objection of limitation.

We disagreed with the labor inspectorate's position, as from the moment the report's findings were presented to our client, it was clear to us that in the Slovak Republic, only the courts are empowered to impose wage compensation obligations, following a proper hearing of the case. This applies regardless of whether the wage claims are time-barred or not. In our view, the labor inspectorate clearly overstepped its authority by assuming the powers of the courts, thereby violating our client's fundamental right to judicial protection. Consequently, in cooperation with our client, we filed an administrative lawsuit challenging the contested inspection report.

Based on our comprehensive submissions, the regional court fully upheld the core arguments of the administrative lawsuit, annulled the labor inspectorate's report, and remanded the matter for further proceedings. As a result, the labor inspectorate will have to issue a new report, but this time it will not be able to arbitrarily impose an obligation on the employer to compensate the employee's wages.

In its judgment, the regional court stated that an administrative body lacks the authority to compel an employer to make monetary payments, such as wage adjustments, which can only be ordered in proceedings where all aspects of the dispute are fully examined and the employer is afforded the complete right to defense, particularly the opportunity to raise a statute of limitations defense. The labor inspectorate’s power to order a controlled entity to remedy identified deficiencies must be interpreted strictly within the limits of its statutory authority, respecting the jurisdiction of other public authorities, primarily the general courts.

This is a precedent-setting judicial decision, and we hope its impact will deter labor inspectorates from infringing on employers’ fundamental rights and overstepping the powers reserved for the general courts. Instead, they should focus on addressing unlawful employer practices that infringe upon employee rights, where the inspectorate’s intervention is clearly authorized by law.

The dispute was managed by members of our labor litigation team, Peter Džurný and Adrián Fedor.